Salon: good articles, not so good investment

Reading annual reports can be just great. For an upcoming feature on, I skimmed the intro to the (public!) company's most recent report....

Reading annual reports can be just great. For an upcoming feature on, I skimmed the intro to the (public!) company's most recent report. While the financial-type info didn't fit so well into the feature, it's worth checking out some highlights from the "Risk Factors" for the company:

Salon has relied on related parties for significant investment capital

Salon has been relying on cash infusions from related parties to fund operations. The related parties are primarily John Warnock, Chairman of the Board of Salon, and William Hambrecht. William Hambrecht is the father of Salon’s President and Chief Executive Officer.

Family ties! And further:

Salon has historically lacked significant revenues and has a history of losses

Salon has a history of significant losses and expects to incur a loss from operations, based on generally accepted accounting principals, for its fiscal year ending March 31, 2008 and potentially in future years. Once Salon attains profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow slower than Salon anticipates or operating expenses exceed expectations, financial results will most likely be severely harmed and the ability of Salon to continue its operations will be seriously jeopardized.

Burr, Pilger & Mayer LLP, Salon’s independent registered public accounting firm for the years ended March 31, 2005, March 31, 2006, and March 31, 2007, included a “going-concern” audit opinion on the consolidated financial statements for those years. The audit opinions report substantial doubt about Salon’s ability to continue as a going concern, citing issues such as the history of losses and absence of current profitability. As a result of the “going-concern” opinions, Salon’s stock price and investment prospects have been and will continue to be adversely affected, thus limiting financing choices and raising concerns about the realization of value on assets and operations.

So: Salon is partly funded with angel investment from the CEO's dad, which, if their accountants are right, he has little chance of recouping. Well, they do write some good articles.

This is why Slate is happy to be partly owned by Warren Buffett.

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